BOSTON ( TheStreet) -- The second-to-last Biotech Stock Mailbag of 2012 begins with an email from Simon K.
Celsion is a fantastic and profitable example of the "biotech run-up" strategy espoused by traders, including TheStreet contributor Mark Messier, who runs a subscription trading service built around profiting from biotech stocks that run up in value ahead of catalysts like clinical-trial results and FDA drug-approval decisions.
Messier nailed the trading opportunity in Celsion, with shares up 63% since this Nov. 14 column.If the surge in Celsion's value is attributable to traders' run-up into the Thermodox phase III trial results in January, remember to heed the rest of Messier's advice: Take profits before the event. If Thermodox blows up, you don't want to kick yourself for not reducing risk exposure and banking easy returns. Messier on Celsion: Cautious run-up traders should exit positions before the end of the year to avoid being caught long when the Thermodox results are announced. If you're thinking about holding a position through the results, I recommend taking profits on your initial trade and keeping "free shares" only. Those who like to trade using options can roll run-up profits into calls that expire after data are expected. Because we don't know exactly when in January Celsion will release Thermodox data, it's safest to use your profits to buy calls that expire in February 2013. Investors get intoxicated on explosive stock runs like we're seeing with Celsion, making it easy to forget the significant risks attached to the Thermodox clinical trial. So let's sober up a bit with a few words from a Celsion short. I spoke this week with one of my favorite fund managers who focuses almost exclusively on biotech shorts.